Every Monday I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Webjet Limited (ASX: WEB) remains the most shorted share on the ASX with short interest increasing to a sizeable 14.5%. Short sellers continue to increase their positions following its full year results. This may be due to concerns over its valuation in comparison to its medium term outlook.
• Speedcast International Ltd (ASX: SDA) continues to have short interest of 11.7%. Short sellers have done well with this one, but have been unable to closer their positions because the communications satellite technology provider’s shares have been suspended for most of 2020. Speedcast is busy trying to recapitalise after declaring itself bankrupt. It recently made progress, announcing a US$395 million equity commitment to complete its chapter 11 recapitalisation.
• Myer Holdings Ltd (ASX: MYR) has seen its short interest reduce week on week once again to 11.5%. Short sellers have been targeting the department store operator on the belief that the pandemic will ruin its turnaround plans.
• Orocobre Limited (ASX: ORE) has seen its short interest rise slightly week on week at 9%. Last week the lithium miner posted a US$67.1 million loss after tax in FY 2020. This was driven by a sharp decline in lithium prices. Orocobre also launched a $156 million equity raising.
• InvoCare Limited (ASX: IVC) has short interest of 8.9%, which is up materially week on week. Short interest has been building since the release of the funerals company’s half year results. Those results revealed a sharp decline in profits because of social distancing restrictions.
• Inghams Group Ltd (ASX: ING) has 8.6% of its shares held short, which is down sharply week on week. Short sellers may be closing positions on the belief that the poultry producer is now over the worst of its problems following its full year result. Inghams reported a 68.2% drop in profits for FY 2020.
• Nearmap Ltd (ASX: NEA) is back in the top ten with short interest of 7.5%. Short sellers may be regretting this one. The aerial imagery technology and location data company’s shares have been strong performers since the release of its full year results. So much so, last week they hit a 52-week high.
• Corporate Travel Management Ltd (ASX: CTD) has short interest of 7.7%, which is up slightly week on week. Once again, short sellers may regret this one. The travel company’s shares are up 79% in August.
• CLINUVEL Pharmaceuticals Limited (ASX: CUV) has seen its short interest reduce slightly to 7.7%. Last week the biopharmaceutical company’s shares sank lower following a disappointing full year result.
• Bank of Queensland Limited (ASX: BOQ) has seen its short interest rise slightly to 7.5%. Some short sellers appear to believe the worst is not over yet for the regional bank.

More reading

• ASX 200 Weekly Wrap: Earnings drag ASX back to reality
• These were the best performing ASX 200 shares last week
• The Corporate Travel share price has nearly doubled in August
• Is today’s Nearmap share price a buy?
• ASX shares are on track for new record highs. Here’s why…

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited, Nearmap Ltd., and Webjet Ltd. The Motley Fool Australia has recommended InvoCare Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It may be really tricky to invest in ASX shares during these uncertain times.

A share price is meant to represent the prospects of a business for the foreseeable future. Many share prices are riding high, yet there’s still a lot of uncertainty. How are you meant to invest in this environment?

Reporting season is coming to an end and it has been quite illuminating.

There are plenty of businesses that you may not have thought that they’d do really well during a recession caused by a pandemic. But they are doing well. 

ASX shares like Harvey Norman Holdings Limited (ASX: HVN), JB Hi-Fi Limited (ASX: JBH), Adairs Ltd (ASX: ADH) and Nick Scali Limited (ASX: NCK) all reported impressive second half results. These retailers are not exactly providing what you’d say are ‘essential’ products. The Australian consumer has been spending a lot of money over the past few months.

We can see that retail strength coming through in the performance of the buy now, pay later companies such as Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P). The valuations of Afterpay and Zip have gone sky high thanks international growth plans. Will they ever make a decent profit? Does it matter?

Returns are what matters

Ultimately, the most important thing that investors get judged on is returns.

It’s the portfolios of holdings like Afterpay, Zip, Kogan.com Ltd (ASX: KGN), Pointsbet Holdings Ltd (ASX: PBH), Megaport Ltd (ASX: MP1) and Nextdc Ltd (ASX: NXT) that have delivered the strongest results over the past year.

If you owned those ASX shares then you’ll have done really well with them. But those are past returns. Are they still good buys? Is it time to take profit off the table? Will cheaply priced shares finally outperform? These are impossible questions to answer because the future is unknowable. It’s particularly difficult to predict right now because of the different outcomes that could happen. 

Another four years of a Trump presidency looks very different to a Biden presidency. The world (and share market) could be very different if a safe and effective vaccine for COVID-19 is created compared to if a vaccine proves impossible to develop.

Investing in ASX shares should consider a range of potential outcomes. A share price shouldn’t be priced as though only the best outcome is the only outcome that’s certain.

Interest rates

Interest rates going down goes some way to justifying today’s prices. Valuations are meant to be higher when interest rates are lower. Businesses that can create growth in a low growth world are going to be highly desirable.

The RBA interest rate is now just 0.25%, which is extremely low. Australia’s central bank has commented several times that the interest rate isn’t going to go negative like other central banks. The RBA has also said that the interest rate is going to stay low for a few years. That’s helpful for valuations. 

It may be a mistake to think that the interest rate will stay lower forever. But I can’t see the RBA deciding to suddenly send the interest rate up quickly either – that would probably be bad for the economy. The RBA has been carefully trying to manage the economy for a number of years, I don’t think it’s suddenly going to throw caution to the wind.

So, what to do about investing in ASX shares?

Don’t forget that some ASX shares are posting big numbers – investor excitement has been vindicated.

There’s an interesting question about what will happen when government support like jobkeeper ends.

There are lots of things to be uncertain about. But share prices keep rising and you’d have missed out on a lot of gains if you stayed in cash. If you can find businesses that you think are good value then I think you just have to go for it. Businesses can keep growing even if there are negative things going on.

Investing is about the long-term, not just what happens in the next few months. I’m sure there will be some volatility when it comes to the US election. But I think there are opportunities. ASX shares like Citadel Group Ltd (ASX: CGL) and Pushpay Holdings Ltd (ASX: PPH) are businesses that I think have very compelling futures, even with what’s going.

More reading

• Where I’d invest $10,000 right now in ASX shares
• 3 stellar ASX growth shares to buy right now
• Why I’d buy Afterpay and other ASX tech shares at record highs
• ASX 200 drops 0.9%, Costa reveals healthy result
• ASX Stock of the Day: Pointsbet share price surges 77% on NBC deal

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Pointsbet Holdings Ltd. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia has recommended Citadel Group Ltd, Kogan.com ltd, MEGAPORT FPO, and Pointsbet Holdings Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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On Friday the S&P/ASX 200 Index (ASX: XJO) was out of form and finished the week deep in the red. The benchmark index fell 0.85% to 6,073.8 points.

Will the market be able to bounce back from this on Monday? Here are five things to watch:

ASX 200 to drop lower.

The ASX 200 looks set to start the week in the red. According to the latest SPI futures, the benchmark index is expected to open the week a disappointing 40 points lower. This is despite Wall Street finishing the week strongly on Friday. The Dow Jones climbed 0.6%, the S&P 500 rose 0.8%, and the Nasdaq pushed 0.6% higher.

Fortescue shares trade ex-dividend.

The Fortescue Metals Group Limited (ASX: FMG) share price is likely to tumble lower today when it trades ex-dividend for its final dividend. The iron ore producer is paying shareholders a final fully franked $1.00 per share dividend. This equates to a 5.3% dividend yield, which could mean its shares fall by a similar margin.

IOOF results and potential AMP acquisition.

The IOOF Holdings Limited (ASX: IFL) share price will be in focus this morning when the financial services company announces its full year results. According to CommSec, the market is expecting a net profit after tax of $132.6 million. The company is also planning to announce a potential significant transaction. There is speculation the company could be interested in acquiring AMP Limited (ASX: AMP).

Oil prices mixed.

Energy producers such as Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) will be on watch after a mixed end to the week for oil prices. According to Bloomberg, on Friday night the WTI crude oil price fell 0.15% to US$42.97 a barrel and the Brent crude oil price rose 0.45% to US$45.81 a barrel. Oil prices have now recorded gains for six out of the last seven weeks.

Gold price jumps.

The shares of Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could be storming higher today after a strong finish to the week for the gold price. According to CNBC, the spot gold price jumped 2.2% to US$1,974.90 an ounce. U.S. dollar weakness supported the price of the precious metal.

More reading

• Unlikely ASX stock winners from the change in the Fed’s inflation policy
• Top brokers name 3 ASX shares to sell next week
• ASX reporting season heroes to buy for FY21
• 5 things to watch on the ASX 200 next week
• My top 5 ASX shares to buy in 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Although the Australian share market came under pressure on Friday, it didn’t stop a number of shares from climbing to new highs.

Three ASX shares that hit new multi-year highs or better are listed below. Here’s why they are flying high:

Catapult Group International Ltd (ASX: CAT)

The Catapult share price climbed to a multi-year high of $2.32 on Friday. Investors have been buying this sports analytics and wearables company’s shares following the recent release of a strong FY 2020 result. Catapult reported a 6% increase in revenue to $100.7 million, thanks to an impressive 21% lift in its subscription revenue to $77.6 million. Things were even better for its operating earnings. Catapult delivered earnings before interest, tax, depreciation and amortisation (EBITDA) of $13.3 million in FY 2020. This was an improvement of $9.2 million and driven by the continued strong subscription revenue growth and a decline in operating expenses. Looking ahead, management continues to expect the company to be cash flow positive in FY 2021.

Marley Spoon AG (ASX: MMM)

The Marley Spoon share price continued its meteoric rise and reached a record of $3.80 at the end of last week. The catalyst for this was the global subscription-based meal kit provider’s half year results. Thanks to the rapid adoption of its offering during the pandemic, Marley Spoon delivered an 89% increase in half year revenue to 116.2 million euros. This led to management upgrading its guidance for the full year to 80% to 100% revenue growth. Another positive was that this strong form means Marley Spoon is now cash flow positive.

Splitit Ltd (ASX: SPT)

The Splitit share price hit a record high of $1.92 on Friday. Investors have been buying the buy now pay later provider’s shares amid increased investor interest in the industry. This means Splitit is now valued over $700 million, despite generating only US$2.4 million of revenue in the second quarter of FY 2020. This looks very excessive to me, especially given its unusual focus. Most buy now pay later companies are leveraging the dislike for credit cards that younger consumers have. Yet Splitit is a payment method solution that allows customers to pay for purchases with an existing credit card by splitting the cost into interest and fee free monthly payments. I feel this gives it a far more limited market opportunity, not least given the declining number of active credit cards.

More reading

• Marley Spoon share price on watch after upgrading revenue guidance
• On a day when the ASX 200 is going nowhere, these popular “coronavirus shares” are hitting record highs
• Brokers name 3 ASX shares to buy right now
• If you invested $8,500 in this ASX share 6 months ago, you’d have $100,000 now
• Catapult share price in focus after strong FY 2020 growth

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Catapult Group International Ltd. The Motley Fool Australia has recommended Catapult Group International Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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As I mentioned here earlier today, the Reserve Bank is expected to keep the cash rate on hold at a record low of 0.25% on Tuesday.

And unfortunately for income investors, this is expected to remain the case for the next three years.

In light of this, I believe income seekers ought to consider investing in some of the high quality dividend shares on the ASX in order to generate a sufficient income.

Two that I would buy next week are listed below:

BWP Trust (ASX: BWP)

The first ASX dividend share to buy is BWP. This real estate investment trust invests in and manages commercial properties throughout Australia. While times are hard for many property companies because of the pandemic, BWP has not only come out of it unscathed, but arguably stronger. This is because the majority of its properties are leased to hardware giant Bunnings, which has been a strong performer during the pandemic. So much so, BWP Trust recognised a $93.6 million increase in the gains in fair value of its investment properties in FY 2020. Overall, given the strength of the Bunnings business, I believe BWP is well-placed to grow its distribution at a solid rate in the future. Based on the current BWP share price, I estimate that it offers investors a forward 4.5% yield.

Telstra Corporation Ltd (ASX: TLS)

Another dividend share I would buy is Telstra. Thanks to its ongoing operating cost reductions, improving industry conditions, the arrival of 5G, and the easing NBN headwind, I believe Telstra’s outlook over the coming years is looking very positive. And while the pandemic is weighing on its performance, particularly with roaming revenues, I’m confident it will make a long awaited return to growth in the next two to three years. Opinion is divided on the dividend it will pay in FY 2021. I’m optimistic it will adjust its policy and maintain a 16 cents per share dividend. However, the worst case scenario of a cut to 12 cents per share wouldn’t be a disaster. Based on the current Telstra share price, these equate to attractive fully franked yields of 5.5% and 4.15%, respectively.

More reading

• 5 top ASX dividend shares you should never sell
• ASX giants say cutting staff hours will save jobs
• Beat ultra low interest rates with these top ASX dividend shares
• What are dividend shares and how do you find them?
• ASX 200 Weekly Wrap: Blue chips, earnings drag ASX lower

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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While the change in the US Federal Reserve inflation policy late last week failed to translate to any meaningful gains for the S&P/ASX 200 Index (Index:^AXJO), make no mistake that this will impact on your ASX portfolio.

The move by the Fed to use the average inflation to control price increases excited US investors. This is because it clears the way for the US central bank to ramp up stimulus as it isn’t constrained by fears of a short-term surge in inflation.

The Reserve Bank of Australia isn’t as aggressive as their US counterparts, but the Fed’s policy change will have implications for ASX investors.

ASX stocks facing more uncertainty in FY21

The irony is that equities aren’t necessarily the biggest beneficiaries of this, and in fact, may be a loser from the move to Average Inflation Targeting (AIT).

By introducing greater flexibility in the inflation target, the Fed is likely to increase inflation volatility, warned Credit Suisse.

And we know from the COVID-19 fallout (and all other crises for that matter) is that volatility is investors’ worst enemy.

“The worry for equity investors is that higher inflation volatility transmits directly to market valuations, independently of rates and yields,” said Credit Suisse in a note on Friday.

“This is because inflation has ambiguous effects on corporate profit margins, depending on whether it is ‘cost-push’ or ‘demand-pull’ in nature.”

Rising risk premium a threat to ASX bull market

Greater uncertainty in the outlook for inflation will push risk premiums higher. A risk premium is the extra protection investors demand if they are to buy shares. The bigger the premium, the lower share prices need to be to entice them.

The ASX looks vulnerable to any increase in the risk premium given its big surge since bouncing from the depth of the bear market in March.

This may be bad news for our share market on the whole, but there’s a silver lining for our embattled ASX banks.

ASX banks catching a rare break

I noticed that the yield curve is steepening after the Fed’s signal it will move to AIT. The willingness for the US central bank to accept more upward pricing pressure is driving longer-dated bond yields higher.

The 10-year Australian Commonwealth Government Bond (ACGB) jumped 13 basis points to 1.04% on Friday, which is a big move for such securities.

Meanwhile, the 3-year ACGB remained largely where it as the RBA committed to keeping the yield on this duration at 0.25%.

As the graph below shows, the spread between short-term to longer-term ACGB is getting wider, thus steepening the yield curve.

Steepening Yield Curve (now vs. 1 year ago)

Source: MarketWatch

This is welcomed news for the likes of the Commonwealth Bank of Australia (ASX: CBA) share price, Westpac Banking Corp (ASX: WBC) share price, National Australia Bank Ltd. (ASX: NAB) share price and Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price.

Small victory

Banks generally benefit from a steeper yield curve as they can borrow short-term funds at a lower rate and lend long.

Of course, there are a lot of moving parts impacting on bank profits at the moment, so a steeper yield curve on its own isn’t enough to turn sentiment, but we need to celebrate every small victory in this volatile environment.

Another group of ASX winners

Another group that will benefit from inflation volatility is commodities. This is particularly so for the safe-haven gold price, in my view.

The Newcrest Mining Limited (ASX: NCM) share price and Evolution Mining Ltd (ASX: EVN) share price have underperformed in August as the price of the precious metal retreated from record highs.

Any material pull-back in gold mining shares is a buying opportunity, in my view. This is particularly so because the US dollar is in for a sustained period of weakness as the Fed injects more stimulus to support the American economy.

More reading

• Will the RBA keep the cash rate on hold for 3 more years?
• ASX reporting season heroes to buy for FY21
• Attention all value investors – here’s one key ratio to help you value a company
• My top 5 ASX shares to buy in 2020
• ASX 200 drops 0.9%, Costa reveals healthy result

Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, Evolution Mining Limited, National Australia Bank Limited, Newcrest Mining Limited, and Westpac Banking. Connect with me on Twitter @brenlau.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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With a new month upon us, now could be a good time to see if there are any additions you could make to your portfolio to take it to the next level.

I think the tech sector would be a good place to look for options, given the quality on offer at this side of the market.

But which ASX tech shares should you buy? Here are a few I would buy:

Appen Ltd (ASX: APX)

Appen is one of my favourite tech shares on the ASX. Its global team of over a million crowd-sourced experts prepare the data that goes into artificial intelligence (AI) and machine learning models. This is a very important part of the process, as high quality data is vital for successful models. Pleasingly, given how important AI is becoming to businesses, I expect demand for Appen’s services to continue to grow over the next decade. This should underpin strong earnings growth for a long time to come.

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

If you would like to invest in a number of tech shares in a single investment, then you might want to look at the BetaShares Asia Technology Tigers ETF. This fund is invested in some of the fastest growing tech companies in the Asia market. These companies are revolutionising the lives of billions of people in the region and look very well-positioned for growth. Included in the fund are the likes of ecommerce giant Alibaba, search engine company Baidu, and Afterpay Ltd (ASX: APT) shareholder and WeChat owner, Tencent.

Xero Limited (ASX: XRO)

A final ASX tech share to consider buying in September is Xero. It has been growing at a strong rate for years and looks well-positioned to continue this trend in the future. Especially given its evolution from a cloud-based accounting service into a full service business solution. It’s offering was given a boost recently by the acquisition of Waddle. It is a cloud-based lending platform that helps small businesses access capital through invoice financing. Management believes the acquisition aligns with its strategy to grow the small business platform and to address critical small business financial needs.

More reading

• Top brokers name 3 ASX shares to buy next week
• Why investing more in super can turbo charge your retirement plans
• These were the worst performing ASX 200 shares last week
• Why I’d buy Afterpay and other ASX tech shares at record highs
• Bulls versus bears – two experts face off on where share prices are going

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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I think there are always ASX share opportunities on the ASX to buy. You just need to buy the right ones at the right price.

It’s a good idea to decide which shares you may want to buy in the form of a watchlist. Then you could jump on opportunities whenever they pop up.

I think the below four ASX shares are long-term opportunities and I’d be very happy to buy for my portfolio right now:

Citadel Group Ltd (ASX: CGL) – $3,000

Citadel is a leading ASX tech share that provides software to help organisations manage data in sectors like defence, education and healthcare.

The company recently reported its FY20 result which had a lot going on, partly due to the acquisition of Wellbeing. I really like the transformational acquisition. It’s a UK software provider for the healthcare industry.

Compared to the core Citadel business, Wellbeing has higher recurring revenue and it also has a higher earnings before interest, tax, depreciation and amortisation (EBITDA) margin. It improved quality of the overall Citadel business.

In FY20 Citadel’s underlying EBITDA grew by 25.3%. I think FY21 and beyond looks very promising for Citadel.

At the current Citadel share price, it’s trading at around 13x FY22’s estimated earnings.

Pushpay Holdings Ltd (ASX: PPH) – $3,500

Pushpay is another exciting ASX share in my opinion.

It’s an electronic donation business which helps its clients facilitate digital giving. Its largest customer base is the US large and medium church sector. There is a huge amount of money donated to US churches each year. Pushpay is aiming for US$1 billion of revenue over the long-term.

The company could become a lot larger partly as a result of its growing profit margins. In FY20 alone Pushpay’s gross margin improved from 60% to 65%. That’s a big increase in one year. It indicates that the business can become more profitable again in FY21, FY22 and beyond.

At the current Pushpay share price it’s trading at 35x FY22’s estimated earnings.

Magellan High Conviction Trust (ASX: MHH) – $1,500

This is a listed investment trust (LIT) which invests in other businesses on your behalf.

The ASX share is managed by Magellan Financial Group Ltd (ASX: MFG), the portfolio is full of Magellan’s best (growth) ideas.

What names make it into a portfolio of (approximately) just 10 names? Some of its biggest holdings include Alibaba, Alphabet, Microsoft, Tencent and Facebook. These are quality global businesses with resilient operating models for the current COVID-19 environment.

At the current Magellan High Conviction Trust it’s trading a 5% discount to the current indicative net asset value (NAV).

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) – $2,000

Soul Patts is a great investment conglomerate in my opinion. It has been around for over a century and I think the current uncertain environment is a good one for the business to excel in.

It owns a number of defensive businesses like telecommunications, property, swimming schools and agriculture. These industries should be able to perform well even during a recession.

The ASX share is regularly adding to its portfolio of investments. There are plans to invest in regional data centres, which is a good growth industry at the moment with the shift to cloud infrastructure.

Not only is Soul Patts a solid growing business, but it also has a great dividend history. It has increased its dividend every year for 20 years in a row.

At the current Soul Patts share price it offers a grossed-up dividend yield of 4.2%.

Foolish takeaway

I really like each of these ASX shares. I think that Citadel and Pushpay have very exciting futures which is why I’d be willing to invest more in both of them. However, I like the long-term returns and diversification offered by Soul Patts and Magellan High Conviction Trust.

More reading

• 3 stellar ASX growth shares to buy right now
• 5 top ASX dividend shares you should never sell
• 2 great ASX shares I’d buy for income and growth
• Volatile day for the Citadel share price following FY 2020 results
• 3 small cap ASX growth shares to buy right now

Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Citadel Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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While some shares have fully recovered from the 2020 market crash, many others continue to trade at relatively low levels. As such, there are still likely to be buying opportunities for long-term investors who are seeking to grow the size of their portfolio.

Through purchasing undervalued shares now, you could benefit from their long-term recovery potential as the prospects for the world economy improve. This may lead to market-beating returns that improve your chances of making a million.

Low valuations after the market crash

Numerous stocks continue to trade at low prices after the market crash. In fact, vast swathes of the stock market are currently trading significantly lower year-to-date, with their uncertain financial prospects causing investor sentiment to remain weak. For example, commodity-related stocks, banks and many support services companies currently trade on valuations that have not been seen since the last major global recession in 2008/09.

Buying stocks at low prices has historically been a sound means to generate high returns in the long run. As with any asset, a lower price provides greater scope for capital growth. It also means there may be a wider margin of safety on offer. In some cases, such as where a company has a solid financial position and long-term growth potential, a low valuation may not be merited. This could reduce overall risks for investors when such companies are purchased as part of a diverse portfolio of shares.

Recovery potential

While some sectors may currently seem unlikely to recover from the 2020 market crash, history suggests that they will encounter improving operating conditions in the coming years. For example, at times it felt as though the world economy would never recover from the global financial crisis. However, through the use of an accommodative monetary policy, global GDP growth gradually recovered. This allowed companies trading in a wide range of sectors to produce rising profitability, which catalysed their share prices.

With policymakers having already sought to stimulate economic growth through fiscal and monetary policy stimulus in many of the world’s major economies, the long-term prospects for global growth could be relatively sound. As such, buying a range of cheap stocks now while other investors are bearish on their prospects may enable you to benefit from a likely recovery in their prospects in the coming years.

Making a million

While the market crash may have temporarily derailed the performance of the stock market, its track record suggests that it offers high return potential in the long run. For example, indexes such as the FTSE 100 and S&P 500 have produced high single-digit annual returns over recent decades.

Assuming an 8% return on a $500 monthly investment, you could obtain a seven-figure portfolio within 35 years. However, through buying undervalued shares now ahead of a likely global economic recovery, you may be able to generate even higher returns than those of the stock market. This could improve your chances of making a million in the coming years.

More reading

• Where I’d invest $10,000 right now in ASX shares
• Top brokers name 3 ASX shares to buy next week
• Will the RBA keep the cash rate on hold for 3 more years?
• Top brokers name 3 ASX shares to sell next week
• ASX reporting season heroes to buy for FY21

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Last week saw a large number of broker notes hitting the wires once again. Three buy ratings that caught my eye are summarised below.

Here’s why brokers think investors ought to buy them next week:

Appen Ltd (ASX: APX)

According to a note out of the Macquarie equities desk, its analysts have retained their outperform rating and lifted the price target on this artificial intelligence services company’s shares to $43.00. Although Macquarie acknowledges that Appen’s first half performance was softer than the market expected, it still believes it will achieve its guidance in FY 2020. It also remains very positive on the future thanks to the increasing spending on artificial intelligence. I agree with Macquarie on Appen and feel it would be a great buy and hold option.

Aventus Group (ASX: AVN)

Analysts at UBS have upgraded this property company’s shares to a buy rating and lifted the price target on them to $2.50. According to the note, the broker was impressed with Aventus’ FY 2020 results and believes it demonstrates the strength of its large format retail assets. And while it acknowledges that no guidance was given for the year ahead, it remains positive on its outlook and expects its assets to benefit from changing consumer habits. I think UBS is spot on and would be a buyer of Aventus’ shares.

Bravura Solutions Ltd (ASX: BVS)

Another note out of Macquarie reveals that its analysts have retained their outperform rating but trimmed the price target on this financial technology company’s shares to $5.50. Although Bravura’s performance in FY 2021 looks set to be disrupted by the pandemic, the broker appears confident this is temporary and its long term prospects remain positive. In light of this, it feels it is worth sticking with the company. I agree with Macquarie and would buy and hold Bravura shares.

More reading

• These were the worst performing ASX 200 shares last week
• Brokers name 3 ASX shares to buy right now
• The Appen share price is down 9% today. Here’s why
• ASX shares are on track for new record highs. Here’s why…
• ASX 200 down 0.9%: Costa impresses, Harvey Norman profits grow, Appen downgraded

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bravura Solutions Ltd. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended AVENTUS RE UNIT. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Top brokers name 3 ASX shares to buy next week appeared first on Motley Fool Australia.

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